Preconditions for market solution to urban water scarcity: Empirical results from Hyderabad City, India

Abstract

Abstract. Utilizing both primary and secondary information pertaining to the water sector of Hyderabad City, India, this paper (1) evaluates the economics of various technically feasible supply augmentations options; (2) estimates the group-specific water demand and consumption response functions under alternative pricing behaviors; (3) calculates the net willingness to pay (NWTP, considered to be the value of raw water at source) of different user groups as derived from their respective price elasticities; (4) shows how inadequate the NWTP is to justify most supply augmentation options including intersectoral water transfers under the existing water rate structure; (5) argues that the economic and institutional conditions internal to urban water sector cannot justify an externally imposed water transfers, whether market-based or otherwise, as long as the water rate structure is inefficient and regressive; and (6) concludes by underlining the central role that the pricing option, both the level and structure, Plays not only in activating a number of nonprice options but also in generating incentives for the emergence of new and the consolidation of existing institutional conditions needed to support economically rooted water transfers and conservation initiatives.

Willingness to pay and municipal water pricing in transition: a case study

“…Saleth and Dinar's (2001) study in Hyderabad, India found net WTP to be inadequate to justify supply augmentation options. This is probable as WTP depends on how much the respondents can afford.…”

Scope sensitivity in households' willingness to pay for maintained and improved water supplies in a developing world urban area: Investigating the influence of baseline supply quality and income distribution upon stated preferences in Mexico City

“…These studies suggest a positive, although highly variable, WTP for supply improvements [Brookshire and Whittington, 1993;Briscoe et al, 1993;Saleth and Dinar, 2001] with some evidence that values were higher for groups enduring lower initial (''baseline'') levels of supply [Altaf et al, 1992]. The magnitude of estimated WTP can be substantial, reflecting the value of the resource under investigation.…”

Vol. 1, No. 2, August 2009

“…The low level of social optimum resulting from services ensured by the public utility has led the urban and peri-urban communities to develop alternative strategies based on private groundwater augmentation. These alternative strategies might include direct use of groundwater from a private tubewell, development of a private small supply network fed with untreated groundwater, or supply by tanker, groundwater remaining the primary source of raw water in most of those private supply chains (Ramachandran, 2008;Maria, 2004;Llorente and Zérah, 2003;Saleth & Dinar, 2001). …”